Tongyang Life Additional Discussion Report: Woori Support Expectations and K-ICS/ALM Follow-up Issues

• Report date: 2026-05-29
• Issuer / Theme: Tongyang Life Insurance / Woori support expectations, K-ICS, ALM, and continuing follow-up on integration burden
• Report type: additional_discussion
• Discussion scope: Summary of additional Q&A on Tongyang Life’s parent support expectations, standalone capital, integration burden, and core insurance earnings capacity, based on the SSC discussion
• Reference context: Existing tongyang_life_issuer_summary_20260514.md, issuer memos, and 2026-05-29 discussion

1. Positioning and Treatment

This report is a supplementary report that organizes the discussion dated 2026-05-29, taking into account the existing Tongyang Life issuer summary. The content discussed here is not a final investment conclusion, nor does it adopt assertions made in the discussion as newly verified facts. The purpose is to distinguish facts already confirmed in the existing report, hypotheses raised in the discussion, and unresolved items that require further verification, and to preserve issues that may otherwise be overlooked in subsequent research.

The confirmed starting points in the existing report are that Tongyang Life has come under Woori Financial Group (Woori FG), that it is scheduled to become a wholly owned subsidiary in August 2026, that becoming part of Woori is a credit-supportive factor but not a legal guarantee, and that Tongyang Life itself still has residual issues, including lower FY2025 earnings, a moderate K-ICS buffer, ALM and investment-asset sensitivity, and the loss-absorption features of its Tier II subordinated notes.

The discussion took this starting point one step further and focused on the extent to which parent support expectations should be incorporated into the credit assessment, warning lines if K-ICS declines again, the short-term burden of integrating ABL Life, capital-allocation constraints at Woori FG, and the internal capital generation capacity of the core insurance business. The sections below reorganize the Q&A content by major question.

2. Main Read-through from the Discussion

The central read-through from the discussion is to view Tongyang Life as an insurer that has been clearly strengthened by joining Woori FG, while not treating it as an issuer equivalent to Woori FG or Woori Bank. Support expectations in a normal operating environment are strong, but the trigger conditions, speed, and means for capital injection, subordinated-debt support, and ALM improvement support under stress remain unverified.

The credit-risk monitoring framework therefore has three layers. The first is Tongyang Life’s standalone K-ICS, ALM, insurance earnings, CSM, and new-business profitability. The second is Woori FG’s CET1, shareholder returns, non-bank investments, ABL Life integration burden, and capital-allocation priorities. The third is the quality of capital, including Tier II subordinated debt, capital-market access, and a possible regulatory shift toward greater emphasis on core capital.

The discussion concluded that a renewed decline in K-ICS toward the low-150% range should be treated as an early-warning line, especially where low interest rates, ALM gaps, weak insurance earnings, valuation losses on risk assets, and reliance on subordinated debt overlap. However, this level has not been confirmed as an official rating trigger or regulatory trigger. It is a hypothetical warning line for portfolio-management purposes.

3. Summary of Q&A Content

3.1 How far does becoming part of Woori FG translate into substantive support expectations?

• Question intent: To assess the extent to which Tongyang Life’s entry into Woori FG and its scheduled conversion into a wholly owned subsidiary in August 2026 can be incorporated into Tongyang Life’s credit profile. In particular, the question was whether Woori FG has both the willingness and capacity to provide prompt and explicit support if K-ICS deteriorates, insurance earnings remain weak, or market conditions worsen.
• Key response: The discussion concluded that becoming part of Woori FG is a clear credit-supportive factor and that support expectations in a normal operating environment are strong. The grounds cited were the already acquired 75.34% stake, the planned full ownership, the strategic objective of strengthening the non-bank business, and the capital, liquidity, and market access of the group, centred on Woori Bank. At the same time, no legal guarantee or debt guarantee has been confirmed, and Tongyang Life’s own standalone risks remain.
• Points examined further in the follow-up: Boundary conditions that could weaken support expectations included Woori FG’s CET1 ratio declining toward around 13%, a priority on shareholder returns, simultaneous capital consumption from non-bank investments such as ABL Life integration and securities-business expansion, a shift in insurance regulation toward greater emphasis on core capital, and deterioration at Tongyang Life being viewed as structural rather than temporary.
• Credit implications: Woori support expectations underpin the rating and market access, but it cannot be assumed that common equity would necessarily be injected immediately whenever needed. Unless a K-ICS floor, conditions for common-equity injection, subordinated-debt support policy, and concrete ALM support measures are presented, support expectations should be treated as a qualitative credit-supportive factor.

3.2 When do K-ICS and ALM interest-rate sensitivity become credit-deterioration triggers?

• Question intent: To assess whether, in Tongyang Life’s downside scenario, the K-ICS ratio and the ALM duration gap would become credit-deterioration triggers before a one-year deterioration in insurance earnings. The question focused on warning lines if Korean interest rates, credit spreads, and risk-asset prices deteriorate in combination.
• Key response: The existing report notes that K-ICS improved to 177.3% in FY2025, but remained below the FY2023 level of 193.4% and was still in recovery from 155.5% in FY2024. The discussion concluded that a decline in K-ICS could surface as a market and rating concern before insurance earnings deterioration becomes visible. In particular, the combination of low interest rates and an ALM gap was treated as an issue that can affect the capital ratio through an increase in liability values.
• Points examined further in the follow-up: The discussion concluded that if K-ICS does not merely decline toward the low-150% range but does so alongside low interest rates, a widening ALM gap, weak insurance earnings, valuation losses on risk assets, and higher reliance on subordinated debt, markets and rating agencies are likely to view standalone capital as thin even under the assumption of Woori support. It was also discussed that, if greater emphasis is placed on the core capital ratio, maintaining headline K-ICS through subordinated debt alone may become insufficient as a credit-supportive factor.
• Credit implications: K-ICS should not be assessed as a standalone number; the reasons for the decline and the quality of capital need to be considered together. Treating a decline below 160% as a caution zone, the low-150% range as a warning zone, and the 130% range as a strong warning zone is appropriate only as a hypothetical early-warning framework for portfolio management, not as an official trigger.

3.3 Is the integration of ABL Life a capital-efficiency improvement or a short-term burden?

• Question intent: To assess how much impact the integration with ABL Life would have on Tongyang Life’s standalone K-ICS, ALM, insurance earnings, and risk management if Woori FG proceeds with the integration after full ownership is completed. The question addressed not only long-term synergies but also the short-term integration burden.
• Key response: The discussion concluded that the integration of ABL Life could improve capital efficiency, distribution, risk management, and business synergies over the long term, but that in the short term it could increase credit risk through integration costs, product and channel restructuring, greater ALM complexity, volatility in insurance earnings, and capital reallocation. The integration format, capital allocation, branding, distribution channels, asset-management structure, and risk-management framework remain undecided.
• Points examined further in the follow-up: The discussion concluded that if integration delays, unexpected system, product, and channel integration costs, a widening ALM duration gap, K-ICS approaching around 150%, and Woori FG capital-allocation constraints occur at the same time, the market is likely to view this not merely as integration costs but as the materialization of standalone credit risk.
• Credit implications: The integration of ABL Life is not necessarily negative in direction, but short-term capital, earnings, and ALM frictions should not be ignored in advance. The key monitoring point is not the announcement of integration itself, but whether cost overruns and K-ICS deterioration emerge at the same time.

3.4 Do Woori FG’s capital-allocation priorities determine the durability of support?

• Question intent: To assess the extent to which the speed and scale of common-equity injection, subordinated-debt support, and ALM improvement support for Tongyang Life could be constrained if Woori FG simultaneously faces CET1 improvement in the banking business, shareholder returns, non-bank investments, ABL Life integration, and securities-business expansion.
• Key response: The discussion concluded that Woori FG’s capital buffer and priorities are important variables determining support expectations for Tongyang Life. The fact that Woori FG strategically values Tongyang Life is supportive, but it was also discussed that the planned conversion into a wholly owned subsidiary via a share exchange has capital-management significance in limiting cash outflow and CET1 deterioration.
• Points examined further in the follow-up: The discussion concluded that markets and rating agencies are likely to react not to shareholder returns or non-bank investments by Woori themselves, but to a situation in which, at the moment Tongyang Life needs support, Woori prioritizes CET1 defence, shareholder returns, and other non-bank investments and does not present a common-equity injection or capital-maintenance policy. If K-ICS around 150%, Woori CET1 constraints, ABL integration burden, the absence of common-equity injection, and higher reliance on subordinated debt overlap, support expectations are likely to be reassessed.
• Credit implications: Parent support should be assessed not only by “capacity” but also by “priority” and “speed”. If Woori FG’s CET1 declines toward around 13% while Tongyang Life’s K-ICS approaches the 150% range, it may become necessary to discount support expectations.

3.5 Is the FY2025 earnings decline a temporary factor or evidence of weak internal capital generation?

• Question intent: To assess whether the decline in FY2025 net income and insurance earnings reflected temporary market factors or adjustments before and after integration, or structural weakness in product margins, distribution-channel mix, CSM generation capacity, lapse rates, and new-business profitability. The issue was not single-year earnings, but the ability to support K-ICS through internal capital generation.
• Key response: The existing report notes that FY2025 net income and insurance earnings declined significantly, while K-ICS improved from FY2024. The discussion concluded that the drivers of the earnings decline have not yet been confirmed and that it remains undecided whether the decline was temporary or structural. Bank channels and the group customer base after joining Woori create scope for earnings improvement, but the short-term contribution has not been verified.
• Points examined further in the follow-up: The discussion concluded that if a slowdown in CSM generation, weaker new-business profitability, higher lapse rates, narrower product margins, and lower distribution-channel efficiency persist structurally, Tongyang Life’s standalone internal capital generation capacity would weaken and K-ICS maintenance would become more dependent on Woori support or subordinated-debt issuance. Whether use of bank channels contributes to earnings improvement was treated as an unverified item to be checked in subsequent financial disclosures.
• Credit implications: If weakness in the core insurance business is structural, a decline in K-ICS would be assessed not only as a market-driven issue but also as a shortfall in internal capital generation capacity. Even with Woori support expectations, unless improvement is visible in CSM, new-business value, lapse rates, and product- and channel-level earnings, the improvement in standalone credit quality will remain limited.

4. Confirmed Issues, Discussion Hypotheses, and Unresolved Items

5. Continuing Follow-up Items and Candidates for Transfer to issuer_notes

The following are candidates for future follow-up extracted from this discussion. issuer_notes.md has not been updated in this work, but these items are preserved as candidates worth continuing to manage in subsequent report updates.

6. Materials and Information to Check Next

In subsequent research, it will first be necessary to review Woori FG’s capital-policy explanation after completion of full ownership. In particular, it will be important to see whether Woori presents a K-ICS target range, common-equity injection policy, subordinated-debt usage policy, and ABL Life integration plan for Tongyang Life or the integrated insurance business.

For Tongyang Life, the analysis should not stop at the K-ICS level itself. It should also review the breakdown of available capital and required capital, the ALM duration gap, interest-rate and spread sensitivity, risk-asset composition, CSM roll-forward, product- and channel-level earnings, new-business value, and lapse rates. To distinguish whether the FY2025 earnings decline reflected temporary market or pre-integration adjustment factors, or structural product, channel, or CSM issues, single-year net income is not sufficient.

From a rating perspective, the next item to check is how Moody's, Fitch, and domestic rating agencies update parent support notching, capital adequacy, quality of capital, and integration risk after full ownership is completed. From the perspective of subordinated-debt investors, it would also be useful to monitor Tier II spreads, the refinancing environment, and market expectations regarding the first reset and call.

7. Unresolved Items

In this discussion, multiple disclosures, media reports, and rating comments were referenced in the discussion, but they have not been re-verified as new primary sources at the time of preparing this report. Therefore, Woori FG’s CET1 target, shareholder-return policy, regulatory changes, rating-agency comments, and K-ICS or CSM figures from Q1 2026 onward are treated as context from the existing report or discussion, and will need to be verified again from primary sources in the next formal issuer_summary update.

In addition, warning lines such as K-ICS in the low-150% range, Woori CET1 around 13%, the core capital ratio, integration costs, and the degree of reliance on subordinated debt are practical hypotheses from the discussion and have not been confirmed as thresholds officially indicated by Tongyang Life or rating agencies. They should be used as candidates for early-warning indicators in portfolio management.

8. Reference Context

• Existing issuer summary: issuer_summary/issuers/tongyang_life/current/tongyang_life_issuer_summary_20260514.md
• Issuer notes reviewed, not updated: issuer_summary/issuers/tongyang_life/issuer_notes.md
• Knowledge snapshot reviewed, not updated: issuer_summary/issuers/tongyang_life/knowledge_snapshot.md
• Source registry reviewed, not updated: issuer_summary/issuers/tongyang_life/source_registry.md
• discussion: discussion dated 2026-05-29